why the new york times will disappear as we know it by 2015

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1 The End Game for the New York Times Gone as a Stand-Alone Newspaper by 2015 April 5th, 2012 Eric Jackson

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Why The New York Times is facing an imminent crisis in the next few years.

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Page 1: Why The New York Times Will Disappear As We Know It By 2015

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The End Game for the New York TimesGone as a Stand-Alone Newspaper by 2015

April 5th, 2012Eric Jackson

Page 2: Why The New York Times Will Disappear As We Know It By 2015

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The New York Times: About to Stare Into the Abyss

• The New York Times is the most recognizable newspaper in the world

• Yet it’s been ravaged in the last 5 years by an evaporation of advertising revenue

• Cost reductions have hit a plateau recently 

• Ad revenues appear set to continue declining without help from paywalls or other digital efforts

• With current trends, it appears the NYT will be unable to continue as a stand‐alone business by 2015

• The rest of the newspaper industry should face a similar crisis even sooner

Page 3: Why The New York Times Will Disappear As We Know It By 2015

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Circulation Price Increases Can’t Compensate for Ad Losses - #s in Millions

NYT Media Group Revenues Disappeared in the Financial Crisis and Aren’t Coming Back

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

2003 2004 2005 2006 2007 2008 2009 2010 2011

NYTMG Ad Revs NYTMG Circ Revs

Page 4: Why The New York Times Will Disappear As We Know It By 2015

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Numbers Reported In Millions

NYT Group Costs Have Gone Down But Have Also Recently Flat‐Lined

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

2003 2004 2005 2006 2007 2008 2009 2010 2011

SG&A Wages Raw Materials

Page 5: Why The New York Times Will Disappear As We Know It By 2015

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Headcount Flat Since Financial Crisis Abated

How Low Can You Go?

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2003 2004 2005 2006 2007 2008 2009 2010 2011

NYT Full‐Time Employees

Page 6: Why The New York Times Will Disappear As We Know It By 2015

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2012 On Track To Be the First of Many Years to Come of Losses from Operations

The Historical Trends are Clear – And Seemingly Irreversible

‐$600

‐$400

‐$200

$0

$200

$400

$600

2003 2004 2005 2006 2007 2008 2009 2010 2011

NYT Operating Profit (MM) NYT Cash Flow from Operations (MM)

Page 7: Why The New York Times Will Disappear As We Know It By 2015

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Staring Down the Barrel of a Gun:

• Cash at the end of 2011 was $280 million, down from $400 million at the end of 2010

• Cash from operations likely to be negative in 2012 if historical trends hold

• Even though nearly half the headcount has been cut since 2003, cuts since 2008 have leveled off

• NYT owes $283 million in contractual obligations this year, including almost half of that in pensions and benefits

• NYT owes $405 million in contractual obligations in 2013 – 2014 and another $879 million in 2005 ‐ 2016

• Pension and benefits costs are rising 2.7% a year in the coming years

Page 8: Why The New York Times Will Disappear As We Know It By 2015

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What Can Be Done?

• Merge

• Sell

• Restructure through bankruptcy

• Refinance

• Sell non‐core assets and smaller papers

Page 9: Why The New York Times Will Disappear As We Know It By 2015

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Other Issues:

• iPad proliferation suggests that Ad revenue could decline faster than the 2009 – 2011 trend

• Circulation might start to trend down in the coming years instead of modest increases, as price increases can’t compensate for cancelled subscriptions

• The Paywall vs. non‐Paywall debate seems to miss the larger point: this ad‐revenue supported business model will no longer be viable after 2015

• Why would Carlos Slim or other financiers want to refinance based on this business model?

• 2014 appears to be the key year for the Times management and board to decide how they can exist after 2015

Page 10: Why The New York Times Will Disappear As We Know It By 2015

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Conclusions:

• Newspapers supported by classifieds and ads will likely cease to exist after 2015

• The only viable news business models moving forward appear to be: – (1) Financial data subscription (e.g., Bloomberg/ThomsonReuters), – (2) Cable subscription (e.g., Comcast, Disney, CBS), – (3) Costs for digital news getting spread across page views of larger Internet company (e.g., Yahoo!) or – (4) Copycat blogging supported by banner ads (e.g., Huffington Post)

• Only other possible model is support by a benefactor (e.g., Apple or the Steve Jobs Foundation)

• If the New York Times can’t make it alone, why would any other smaller newspaper?

• Investigative reporting will become even more invisible than it is today in the coming years